Related Cos. has agreed to acquire 7,837 affordable housing units from Apartment Investment and Management Co. (Aimco).
The company’s affordable housing division, Related Affordable, has entered into a binding agreement to purchase Aimco’s asset management portfolio and four affordable real estate communities for $590 million.
The asset management portfolio is a fee-based business in which Aimco is the general partner in partnerships owning interests in low-income housing tax credit apartment communities. As general partner, Aimco (NYSE: AIV) provides asset management and other services to these partnerships and receives fees and other payments in return.
Officials said the units involved in the transaction are located across 51 properties in 16 states and includes the Hunters Point communities—four affordable, garden-style developments with 604 apartment homes in San Francisco.
“The development and preservation of affordable housing has been a cornerstone of Related’s business for more than 40 years,” said Matthew Finkle, president of Related Affordable. “We have preserved tens of thousands of affordable housing units across the country and have never converted a single unit to market rate—a legacy we intend to extend to all of the 7,837 apartments in this portfolio.”
Once the closing of this transaction is complete, which is anticipated to occur in the third quarter, Related will begin implementing preservation plans for the 51 properties, according to company leaders.
For Aimco, the deal simplifies its business and completes a planned exit from the affordable housing sector that was announced in 2011, according to Terry Considine, Aimco chairman and CEO.
“The completion of this transaction will be accretive to Aimco’s net asset value by $126 million while preserving affordable housing through its transfer to a long-term, high-quality operator of affordable assets,” Considine said.
After closing costs and repayment of the Hunters Point property debt, the net proceeds to Aimco are expected to be approximately $512 million, which the company plans to use to partially fund the previously announced acquisitions of the 748-unit Bent Tree apartment community in Fairfax County, Va., and a portfolio of six communities in Philadelphia, and to reduce leverage, including the redemption of Class A preferred stock callable in the second quarter of 2019. Taken together, these transactions are expected to reduce Aimco’s adjusted funds from operations by $0.03 per share in 2018 and $0.04 per share in 2019, before becoming accretive in 2021, said the company.
Related owns and operates a portfolio of more than 45,000 affordable and workforce housing units.